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All available-for-sale investments are reported as long-term assets on the balance sheet.
Mumbai Travel Services provided the following information:
Direct labor rate: $40 per hour
Predetermined overhead allocation rate for indirect costs: $22 per direct labor hour
If Mumbai Travel earns $350 for a job requiring 5 hours of direct labor, then Mumbai
Travel will make a profit of $40.
Equity decreases with expenses and revenues.
Local, state, and federal governments use accounting information to calculate income
taxes.
The maturity value of a note is the sum of the principal minus interest due at maturity.
Recipes, Inc. purchased $2,000 of supplies on account. Under the accrual basis of
accounting, no entry is made until the amount is paid.
During the year, a company incurred $498,000 of manufacturing overhead costs and
allocated $510,000 of manufacturing overhead costs. At the year-end, the adjustment
entry needed to adjust the Manufacturing Overhead account balance to zero will include
a debit to Cost of Goods Sold.
Companies sometimes obtain financing and do not receive cash. Although such
transactions do not directly involve cash, they still must be reported in the financing
section of the statement of cash flows.
The journal entry for the purchase of treasury stock includes a credit to Cash.
A chart of accounts is a detailed record of the changes in a particular asset, liability, or
equity account during a specified period.
Total variable costs change in direct proportion to changes in the volume of production.
In a period of rising costs, the first-in, first-out (FIFO) method results in lower cost of
goods sold and higher gross profit than the last-in, first-out (LIFO) method.
When a corporation retires its shares of treasury stock, the stock certificates are
canceled.
The current portion of notes payable is the principal amount that will be paid within two
years of the balance sheet date, and the remaining portion is long term.
Accounting for stated value common stock is identical to accounting for par value
stock.
Under a process costing system, costs of completed products are transferred to the
Finished Goods Inventory at the end of the accounting period.
In the case of deferred revenue, the cash is received first, and the revenue is earned
later.
The statement of cash flows informs users about how much of the earnings were kept
and reinvested in the company.
When a business records an accrued utility liability, the Utilities Expense account is
credited.
The three sections of the statement of cash flows report only activities that involve cash.
Centralized operations are better for small companies due to the smaller scope of their
operations.
Equity securities, in which the investor owns less than 20% ownership in the voting
stock of the investee, can be either trading investments or available-for-sale
investments.
An accounting firm collected cash on account. As a result of this transaction, assets and
revenues increase.
All else being equal, investments with longer payback periods are preferable.
Given the same purchase and sales data, and assuming the cost of inventory is rising,the
costing methods for inventory will result in different amounts for sales revenue.
A company reports in its financial statements that it uses the FIFO method of inventory
costing. This is an example of the disclosure principle.
Flexible budgets use budgeted (or standard) costs at the actual level of activity.
Amounts needed for the preparation of the budgeted balance sheet are taken from
various operating and financial budgets.
An opportunity cost is the benefit foregone by choosing an alternative course of action.
The useful life of a plant asset is the length of the service period expected from the
asset.
When a company makes an accounting change, Generally Accepted Accounting
Principles require that the company make changes to financial statements of prior years.
The debt ratio shows the proportion of assets financed with debt.
The times-interest-earned ratio is also called the short interest ratio.
Based on the following, what is the total direct labor variance?
A) $50 F
B) $450 U
C) $500 F
D) $50 U
Prudence Company incurs both fixed and variable production costs. Assuming that
production is within the relevant range, if volume goes up by 28%, then the total fixed
costs would ________.
A) increase by 28%
B) remain the same
C) increase by an amount less than 28%
D) decrease by 28%
Which of the following actions will decrease Retained Earnings?
A) repayment of bond principal
B) stock split
C) stock dividend declared
D) purchase of treasury stock
Capital budgeting is the ________.
A) process of planning for investments in long-term assets
B) preparation of the budget for operating expenses
C) process of evaluating the profitability of a business
D) process of making pricing decisions for products
When there is an unrealized loss on trading investments, the ________ will decrease.
A) total equity
B) cash
C) total liabilities
D) long-term investments
A company is evaluating three possible investments. Each uses the straight-line method
of depreciation. Following information is provided by the company:
What is the accounting rate of return for Project B? (Round your answer to two decimal
places.)
A) 38.14%
B) 26.19%
C) 54.55%
D) 51.83%
Americana Company is preparing its budget for the third quarter. Cash balance on July
31 was $30,000. Assume there is no minimum balance of cash required and no
borrowing is undertaken. Additional budgeted data are provided here:
Calculate the projected balance of cash at the end of August.
A) $(23,000)
B) $3,000
C) $38,000
D) $33,000
A streamlined process that bypasses paper documents altogether and in which
computers of retailers communicate directly with the computers of suppliers to
automate routine business transactions is known as ________.
A) Real Time Gross Settlement
B) Electronic Data Interchange
C) Electronic Fund Transfer
D) Evaluated Receipts Settlement
The financial statements for Myers Service Company include the following items:
Compute the acid-test ratio for 2016. (Round your answer to two decimal places)
A) 0.88
B) 0.80
C) 0.92
D) 0.71
What is the maturity value of a 3-month, 14% note for $50,000? (Round your answer to
the nearest dollar.)
A) $52,000
B) $57,000
C) $51,750
D) $50,000
Merchandise Inventory increased $28,000 and Accounts Payable decreased $19,600
during the year. Accounts Payable relates only to the acquisition of merchandise
inventory. Sales were $796,000 and Cost of Goods Sold was $549,700. Compute the
payment made to the suppliers.
A) $577,700
B) $569,300
C) $597,300
D) $47,600
Management of a company is accountable to ________ for obeying laws and paying
taxes.
A) the natural environment
B) its asset vendors
C) the securities exchange
D) the government
Nice International originally issued 105,000 shares of common stock at a price of $22
per share. A year later, it distributed a 12% stock dividend to shareholders. At the time
of the stock dividend, the share price had increased to $27 per share. Which of the
following statements is true?
A) Nice will record sales revenues of $277,200.
B) Nice will record a loss of $63,000.
C) Nice will record a gain of $63,000.
D) Nice will record neither a gain nor a loss.
Value Electronics uses a standard part in the manufacture of different types of radios.
The total cost of producing 25,000 parts is $95,000, which includes fixed costs of
$40,000 and variable costs of $55,000. The company can buy this part from an external
supplier for $3 per unit and avoid 20% of the fixed costs. If Value Electronics decides to
outsource the production of the part, how will it impact its operating income?
A) Operating income increases by $12,000.
B) Operating income decreases by $12,000.
C) Operating income increases by $20,000.
D) Operating income decreases by $20,000.
On January 1, 2017, Streuly Sales issued $29,000 in bonds for $20,700. These are
six-year bonds with a stated rate of 12% and pay semiannual interest. Streuly Sales uses
the straight-line method to amortize the Bond Discount. Immediately after the issue of
the bonds, the ledger balances appeared as follows:
Bonds Payable
Discount on Bonds Payable
After the second interest payment on December 31, 2017, what is the balance of Discount
on Bonds Payable?
A) debit of $7,608
B) debit of $8,992
C) debit of $6,917
D) credit of $8,300
Which of the following will be debited to the Manufacturing Overhead account of a
watch manufacturer?
A) office telephone costs
B) salaries paid to accountants
C) factory electricity costs
D) cost of printing brochures
Merchandise Inventory and Cost of Goods Sold appear ________.
A) on the balance sheet and statement of retained earnings, respectively
B) on the statement of retained earnings and income statement, respectively
C) on the balance sheet and income statement, respectively
D) on the income statement and statement of cash flows, respectively
Connections Company provides cleaning services to commercial and residential
customers. The commercial business segment provided services to 270 customers and
the residential business segment provided services to 665 customers.
Identify the segment with the lower contribution margin ratio and show the amount of its
contribution margin ratio. (Round your answer to two decimals.)
A) Residential, 55.17%
B) Commercial, 40.60%
C) Residential, 44.83%
D) Commercial, 27.66%
In which of the following ways is the management of a company accountable to its
communities?
A) making timely interest payments to creditors and dividend payments to investors
B) ensuring the company's environmental impact is not harmful to its community
C) providing a capital return on the shareholders' investment
D) repaying principal and interest to the suppliers
At the beginning of the year, Swift, Inc.'s Work-in-Process Inventory account had a
balance of $124,000. During the year, $250,000 of direct materials were used in
production, and $72,000 of direct labor costs were incurred. Manufacturing overhead
amounted to $832,000. The cost of goods manufactured was $676,000. What is the
balance in the Work-in-Process Inventory account on December 31?
A) $1,154,000
B) $1,352,000
C) $676,000
D) $602,000
Crystal Pools, Inc. has provided the following information for the year.
What is the unit product cost using absorption costing?
A) $75
B) $178
C) $135
D) $100
Travel Trails, Inc. manufactures railway coaches and uses the FIFO method of process
costing to record costs. The Work-in-Process Inventory of the Heating Department on
October 1 was 74% complete for materials and 23% complete for conversion costs. On
October 31, its ending Work-in-Process Inventory was 84% complete for materials and
41% complete for conversion costs. This means that for the ending inventory, ________
% of the materials and ________% of the conversion costs were added during October.
A) 74; 41
B) 26; 23
C) 84; 41
D) 41; 84
Which of the following is the correct formula for measuring a cost variance?
A) Cost Variance = (Actual Cost + Standard Cost) / Actual Quantity
B) Cost Variance = (Actual Cost - Standard Cost) × Actual Quantity
C) Cost Variance = (Actual Cost + Standard Cost) + Actual Quantity
D) Cost Variance = (Actual Cost - Standard Cost) - Actual Quantity
Seal Financial Advisors provides accounting and finance assistance to customers in the
retail business. Seal has four professionals on staff and an office with six clerical staff.
Total compensation, including benefits, for the professional staff runs about $571,000
per year, and normal billable hours are 8,100 hours per year. The professional staff keep
detailed time sheets organized by client number. The total office and administrative
costs for the year are $754,000. Seal allocates office and administrative costs to clients
monthly, using a predetermined overhead allocation rate based on billable hours. What
is the predetermined overhead allocation rate that Seal will use for office and
administrative costs? (Round your answer to the nearest cent.)
A) $93.09 per hour
B) $22.59 per hour
C) $70.49 per hour
D) $163.58 per hour
Assume MetAmbit Corporation had a net income of $2,300 for the year ending
December 2016. Its beginning and ending total assets were $33,500 and $18,000,
respectively. Calculate MetAmbit's return on assets (ROA). (Round your percentage
answer to two decimal places.)
A) 6.87%
B) 12.78%
C) 8.93%
D) 4.47%
When determining the product costs for long-term planning, ________.
A) the research and development cost of the product should be ignored
B) variable costing is more appropriate
C) absorption costing is more appropriate
D) the selling and administrative expenses should be ignored
The asset account, Office Supplies had a beginning balance of $5,300. During the
accounting period, office supplies were purchased, on account, for $4,900. A physical
count, on the last day of the accounting period, shows $2,300 of office supplies on
hand. What is the amount of Supplies Expense for the accounting period?
A) $4,900
B) $2,700
C) $7,900
D) $3,000
Sales revenue for a sporting goods store amounted to $526,000 for the current period.
All sales are on account and are subject to a sales tax of 10%. Which of the following
would be included in the journal entry to record the sales transaction?
A) a debit to Sales Revenue for $526,000
B) a credit to Accounts Receivable for $526,000
C) a debit to Sales Tax Payable for $52,600
D) a debit to Accounts Receivable for $578,600
Star Health, Inc. is a fitness center in Oklahoma City. In October, the company earned
$550,000 in revenues and incurred the following operating costs from 300 customers:
How much is the unit cost per customer? (Round your answer to the nearest cent.)
A) $93.33
B) $19.00
C) $1,833.33
D) $135.67
On July 1, 2017, Adams Company has bonds with balances as shown below.
Bonds Payable
Premium on Bonds Payable
If the company retires the bonds for $74,150, what will be the effect on the income
statement?
A) gain on retirement of $6,950
B) loss on retirement of $6,950
C) gain on retirement of $650
D) loss on retirement of $650
Victory Tire Company makes a special kind of racing tire. Variable costs are $210 per
unit, and fixed costs are $30,000 per month. Victory sells 700 units per month at a sales
price of $310. If the quality of the tire is upgraded, the company believes it can increase
the sales price to $350. If so, the variable cost will increase to $240 per unit, and the
fixed costs will remain the same. If Victory decides to upgrade, how will it affect
operating income?
A) Operating income will decrease by $7,000.
B) Operating income will decrease by $21,000.
C) Operating income will increase by $21,000.
D) Operating income will increase by $7,000.
Kamal Company incurs both fixed and variable production costs. Assuming that
production is within the relevant range, if volume goes up by 20%, then the total costs
would ________.
A) increase by 20%
B) remain the same
C) increase by an amount less than 20%
D) decrease by 20%
Which of the following will be categorized as an investing activity on the statement of
cash flows?
A) Purchase of land with a mortgage
B) Cash paid for purchase of new machinery
C) Cash paid for purchase of office supplies
D) Cash received from issuance of shares of common stock
At the beginning of the year, Rupert Manufacturing had the following account balances:
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
Cost of Goods Sold
Sales Revenue
The following additional details are provided for the year:
Direct materials placed in production $ 80,000
Direct labor incurred 190,000
Manufacturing overhead incurred 300,000
Manufacturing overhead allocated to production 295,000
Cost of jobs completed 500,000
Jobs sold for total revenue of 750,000
Cost of jobs sold 440,000
The remaining balance of Manufacturing Overhead was adjusted to zero. Calculate the
ending balances in Work-in-Process Inventory, Finished Goods Inventory, Manufacturing
Overhead (unadjusted), and Cost of Goods Sold (after adjustment.)
Peterson, Inc. issued 4,000 shares of preferred stock for $240,000. The stock has a par
value of $60 per share. Prepare the journal entry for this transaction.
On January 1, 2017, Davie Services issued $20,000 of 8% bonds that mature in five
years. The bonds were issued at par. Prepare the journal entry to issue bonds.
Marketplace, Inc. completed the following treasury stock transactions in 2016:
June. 3 Purchased 2,000 shares of the company's $5 par value common stock as
treasury stock, paying cash of $15 per share.
June 14 Sold 800 shares of the treasury stock for cash of $20 per share.
Journalize these transactions. Explanations are not required.
How will Marketplace, Inc. report treasury stock on its balance sheet as of December
31, 2016?
Complete the statement, using the following terms: increase, decrease, or have no
effect on.
Increases in sales price per unit ________ contribution margin per unit and ________
the breakeven point.
Planet Manufacturing provided the following information for the month ended March
31:
Prepare the income statement.
From the following details, provided by a merchandising company, prepare the selling
and administrative expenses budget for the first quarter of the next year.
Sandstorm, Inc. signed a 200-day, 5%, $5,000 note on April 1, 2017, and this was the
only note payable for the company. Calculate the times-interest-earned ratio of
Sandstorm, Inc. if its earnings before interest and taxes for the year ending December
31, 2017, is $4,300. (Use a 360-day year.)
Complete the table to show how each type of employee pay is generally stated.
What is a quality management system? What is the common factor in all quality
management systems?
Refer to the following bank reconciliation:
Bank Book
Balance, June 30, 2017 $11,240 Balance, June 30, 2017 $10,200
Add: Add:
Deposit in transit 3,110 Note collected by bank 2,100
Interest revenue 55
Less: Less:
Outstanding checks #506 1,200 NSF check 85
Outstanding checks #510 900 Bank service charge 20
________ ________
Adjusted balance, Adjusted balance,
June 30, 2017 $12,250 June 30, 2017 $12,250
Journalize the adjusting entry for the second reconciling item: Interest revenue.
Oscar Packers received an allowance from the vendor for an amount of $400. Give the
journal entry for this transaction. The company uses a perpetual inventory system.
List and discuss three ways in which the statement of cash flows helps financial
statement users.
Murphy Productions is a price-taker. The company produces generators in a highly
competitive market; thus, it uses target pricing. The current market price is $600 per
unit. The company has $18,500,000 in average assets, and the desired profit is a return
of 8% on assets. Assume all products produced are sold. The company provides the
following information:
Currently the cost structure is such that the company cannot achieve its profit objective
and must cut costs. If variable costs cannot be reduced, how much reduction in fixed costs
will be needed to achieve the desired target? Show all computations.
Newbury Office Supply reported the following gross profit percentages: 2014: 37.5%;
2015: 36.2%; 2016: 20.8%. The industry average is 35%. What are some possible
reasons for the decline in 2016?
Complete the following table, which compares the effects of LIFO, FIFO and
weighted-average inventory costing methods on the financial statements in periods of
declining inventory costs. The answer should be lowest, highest, or middle.
